TR: surge in demand for dealing tech from European banks

Complying with the myriad of new financial regulations is front and centre in the minds of market participants when they upgrade or replace their technology infrastructure. Demand from smaller European banks has been especially prominent, as the segment rethinks its requirements.

Thomson Reuters has been voted the winner in three categories at the 2016 FX Week Best Banks Awards, taking the crown for Best Vendor for Dealing Technology, Best Broker for Forward FX and Best Broker for Emerging Markets.

"Our biggest immediate priority for FX forwards is Mifid II," says Neill Penney, co-head of trading at Thomson Reuters. "For the first time in Europe, FX forwards come under regulation and we want to make sure the journey is as smooth as possible for our customers."

The big question is whether the FX forwards market goes towards clearing. We feel this is increasingly likely to happen at some point
Neill Penney, Thomson Reuters

"The big question is whether the FX forwards market goes towards clearing. We feel this is increasingly likely to happen at some point, especially since the new margin requirements for forwards trading are starting to impact people's decision-making and will increase the pressure on clearing," he adds.

Going forward, Penney believes the increasingly fragmented nature of liquidity in FX markets will intensify the need for aggregation tools in the years to come.

"There is increasingly the need for trading desks to have the ability to access multiple sources of liquidity from different venues," he says. "Some of that liquidity will be ours, some of it will be from third-party venues, and the aim is to integrate the fragmented liquidity in the market in order to achieve best execution."

This year, Thomson Reuters expanded its footprint, which hit an all-time high, servicing 5,000 institutional customers globally across 20,000 desktops in 120 countries, with a total of $350 billion in FX trades being transacted daily on its platforms.

EM focus

Emerging markets have been a long-standing focus for the company, and some show significant room for growth in terms of electronic trading. This year, south and central America were especially strong growth regions, as well as Asia.

Most recently, the broker made some inroads in Africa, where it launched an FX central limit order book in Nigeria in conjunction with the country's central bank, and it is currently working on rolling out Thomson Reuters Matching in several Asian markets.

"As electronic trading in emerging markets moves from the beginning phase to one where it becomes the heart of how they trade, Thomson Reuters is well positioned to help them in that transition," says Penney.

E-dealing technology

In the e-dealing space, meanwhile, banks are moving away from building technology solutions in-house and taking steps to simplify their technology stacks. The move reflects the realisation that banks' core business is to service customers.

"The integration of our dealing technology into our next-generation desktop, FX Trading, has provided a set of next-generation tools to our customers globally," says Penney. "We have also used the opportunity to upgrade our Electronic Trading product, which enables banks to create electronic prices and we have integrated this technology into our FX platform."

Demand for upgraded dealing and trading technology from smaller European banks has been particularly significant, as these market participants re-evaluate their needs in light of regulation and the evolution of the market.

"As foreign exchange banks need to focus on serving their customers, they need workflow tools to help them achieve that. They need venues that are neutral and have a public rule book. They need quality market data to make objective decisions and to back up performance mathematically. We feel those are trends in the industry that are set to continue, and that's where we want to put our investment and growth," Penney adds.

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